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Analyzing Time–Frequency Based Co-movement in Inflation: Evidence from G-7 Countries

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  • Aviral Tiwari
  • Niyati Bhanja
  • Arif Dar
  • Olaolu Olayeni
Abstract
The co-movement in the international inflation rates, among others, may be produced by common shocks, similarities in central bank reaction functions, international trade and the operation of purchasing power parity theory. However, to assess the synchronization of inflation fluctuations across countries or regions is critical from the perspective of understanding inflation behavior and formulation of correct monetary policy. This study attempts to investigate inflation rates co-movement among G7 countries at different frequencies or time scales under the framework of the continuous wavelets. In particular, this study analyzes the coherency and the phase relationship in time–frequency space in inflation rates of G7 countries. The wavelet-based measure of cohesion allows us to assess simultaneously how synchronization has evolved over time and across frequencies. Overall, our results indicate that inflation co-movements in G7 countries are multi-scale and characterized by structural breaks. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Aviral Tiwari & Niyati Bhanja & Arif Dar & Olaolu Olayeni, 2015. "Analyzing Time–Frequency Based Co-movement in Inflation: Evidence from G-7 Countries," Computational Economics, Springer;Society for Computational Economics, vol. 45(1), pages 91-109, January.
    • Handle: RePEc:kap:compec:v:45:y:2015:i:1:p:91-109
    DOI: 10.1007/s10614-013-9408-5
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    Cited by:

    1. Aviral Kumar Tiwari & Muhammad Shahbaz & Haslifah M. Hasim & Mohamed M. Elheddad, 2019. "Analysing the spillover of inflation in selected Euro-area countries," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(3), pages 551-577, September.
    2. Avishek Bhandari & Kamaiah Bandi, 2018. "On the Dynamics of Inflation-Stock Returns in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 89-99, March.
    3. Kang, Sang Hoon & Lahmiri, Salim & Uddin, Gazi Salah & Arreola Hernandez, Jose & Yoon, Seong-Min, 2020. "Inflation cycle synchronization in ASEAN countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    4. Khandokar Istiak & Aviral Kumar Tiwari & Humaira Husain & Kazi Sohag, 2021. "The Spillover of Inflation among the G7 Countries," JRFM, MDPI, vol. 14(8), pages 1-20, August.
    5. Aviral Kumar Tiwari & Muhammad Ali Nasir & Muhammad Shahbaz, 2021. "Synchronisation of policy related uncertainty, financial stress and economic activity in the United States," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6406-6415, October.
    6. Selcuk Bayraci & Sercan Demiralay & Hatice Gaye Gencer, 2018. "Stock†Bond Co†Movements And Flight†To†Quality In G7 Countries: A Time†Frequency Analysis," Bulletin of Economic Research, Wiley Blackwell, vol. 70(1), pages 29-49, January.
    7. Elsayed, Ahmed H. & Hammoudeh, Shawkat & Sousa, Ricardo M., 2021. "Inflation synchronization among the G7and China: The important role of oil inflation," Energy Economics, Elsevier, vol. 100(C).

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    More about this item

    Keywords

    Co-movement; Wavelets; Time–frequency; Inflation; G7; C40; E31; E32; F44;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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